IMF: Middle East recovering from oil shocks, financial crisis

IMF: Middle East recovering from oil shocks, financial crisis Istanbul  - Middle Eastern economies are on the rebound as oil prices are back on the rise and the global financial crisis is easing, the International Monetary Fund (IMF) said Thursday.

In its semi-annual World Economic Outlook, the IMF revised upwards its growth forecasts for a region that has been hard-hit in the past year by the crash in oil prices and a crisis that struck financial centres in Bahrain and Dubai.

The Middle East as a whole will grow by 4.2 per cent in 2010, the IMF said, after forecasting 3.7-per-cent growth in July. The region's growth slowed to 2 per cent in 2009.

Governments, many of which had been flush with cash from oil revenue in past years, have been aggressive in propping up their economies during the global downturn. As a percentage of economic output, Saudi Arabia has plugged more money into its economy than any other government in the Group of 20 (G20).

Oil exporters have been especially hard-hit by the crisis. Those countries that import oil grew about three times as fast as oil exporting countries in 2009.

Oil prices reached a low of 36 dollars per barrel in February, at the height of the world's worst recession since World War II, but climbed back to around 70 dollars per barrel over the summer months.

The IMF said the world economy will shrink 1.1 per cent this year before growing 3.1 per cent in 2010 - up from a July forecast of 2.5 per cent for 2010.

The biggest risk to the Middle East remained another drop in oil prices if the global recovery does not continue, the IMF said. Some oil exporters may need to start cutting back on public spending in order to maintain their reserves.

"Countries with fiscal room should continue with these policies ... to help the recovery gain momentum," the IMF report said. "However, countries with weaker fiscal positions will need to cut back unproductive spending to avoid an unsustainable debt path." (dpa)